Telephone pricing structures: The effects on universal service

We use 1987 data to study the household demand for access to the telephone system. Previous analyses find demand to be highly inelastic and, therefore, predict that local rate increases will have little impact on the goal of providing universal telephone service. We estimate that price has a considerably stronger effect on access demand, especially at low incomes, and argue that elasticities increased in the 1980s. But our evidence also suggests that the structure of telephone rates matter: where local measured service is available, changes in flat rate prices have no effect on access demand.